21 October 2021
If the client does not have a need that he can cover by purchasing our product, we will not have sales and, as a result, profit.
If the client has a need, but our product does not solve the need very well. Then we can sell our product to the client through distribution, partnerships, marketing, but the cohorts will quickly die, we will be vulnerable to competitors who will make the product better.
Creating a product is an incredibly complex process. Defocusing, mistakes in logic, political games, emotional attachment to an “amazing idea!” lead to the fact that we, the products, create what no one needs.
In the venture capital industry, it is believed that 90% of startups die
- 2012 Startup Genome Report on Premature Scaling
- 2019, CBInsights, Tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 1 reason for failure, noted in 42% of cases. The Top 20 Reasons Startups Fail
- 3 — 2017, Andreessen Horowitz, «Startups need 2-3 times longer to validate their market than most founders expect. This underestimation creates the pressure to scale prematurely… In our dataset we found that 70% of startups scaled prematurely along some dimension. While this number seemed high, this may go a long way towards explaining the 90% failure rate of startups», 12 Things about Product-Market Fit
The first principle through which, in my opinion, it is worth increasing the number of hypotheses fired per quarter/year is to ask yourself the question “Does the client need this?” or better yet, “Is the client willing to pay for it now?”
How Big Companies Are Culturally Sewing Customer Obsession
Focus on the user and all else will follow. Since the beginning, we’ve focused on providing the best user experience possible. Whether we’re designing a new Internet browser or a new tweak to the look of the homepage, we take great care to ensure that they will ultimately serve you, rather than our own internal goal or bottom line. Our homepage interface is clear and simple, and pages load instantly. Placement in search results is never sold to anyone, and advertising is not only clearly marked as such, it offers relevant content and is not distracting. And when we build new tools and applications, we believe they should work so well you don’t have to consider how they might have been designed differently.
Patreon
Put creators first. Deliver unusual care to creators. Our business is creators’ income and rent checks, so we do not take our responsibility lightly. We exist because of, and in service of, creators. There is a creator behind every text, email, call, request, bug, and payment issue, and we treat them as human beings, not users. We will fight to keep the human spark in our relationship as we scale. As a business, we invest in teams like Community Happiness and Creator Care who are on the front lines taking care of our creators. We revere these teammates on the front lines.
Amazon
Customer Obsession. Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.
Amazon has Customer Obsession embedded in its core product creation process.
Working Backwards.
Uber
We are customer-obsessed. We work tirelessly to earn our customers’ trust and business by solving their problems, maximizing their earnings or lowering their costs. We surprise and delight them. We make short-term sacrifices for a lifetime of loyalty.
ROCKETECH
Rocketech’s strategy is based on building long-term relationships with each customer. Therefore, customer service and customer experience are embedded in the company’s cultural code. Following the principles of “best customer experience” is broadcast to other teams so that their technological solutions become better and more efficient.
We offer not just development, but a dedicated team, which becomes part of the customer’s team for the duration of the work. We take upon ourselves not only the execution of tasks, but also share responsibility for the result, we offer expertise at each stage. On the one hand, this approach seriously complicates the task for the company, but we are ready to sacrifice time and invest in resources so that a startup that comes to us starts the path to a unicorn with us, having received a really working product the first time. It is the dedicated team as our unique advantage that allows us to do this with the greatest efficiency.
Not all clients are created equal
ABCDX-segmentation is customer segmentation, through the prism of how much they need YOUR product.
ABCDX-segmentation works only for products that have thousands of paying customers, JTBD / problem interviews are suitable for finding a new segment, for products with hundreds of paying customers — Sean Ellis segmentation [4].
The essence of ABCDX segmentation: your product divides all the people who have paid you into 4 segments according to the degree of value your product brings to them:
- A Segment – the product is super needed, they buy a lot and with pleasure, the transaction cycle is small, they do not remind of themselves at all, they just pay.
- B Segment – the product is needed, there are objections, something is missing. They pay plus or minus regularly, the transaction cycle is relatively small, the average check is above average.
- C Segment – there is a need for a solution, but not yours, your product does not help them much. The cycle of the transaction is huge, the average check is small, it falls off easily, tortures salespeople and support.
- D Segment – take out the brain and do not buy
- X Segment – potentially your A segment, but your product in its current form does not suit them, requires modifications
IIDF – one of the most active Russian VC funds and accelerators, analyzed portfolio companies and found that teams spend only 20% of their time working on the needs for A and B segments. At the same time, A and B segments bring 80% of revenue, while C and D – 20% of revenue.
Why? C and D scream loudly, write and call support, whine on social networks. As a result, we, as reactive animals, do what falls into the focus of our attention. And we don’t make money on them…
Therefore, it is not worth making a product for all customers, but only for AB-segments.
Conclusion
If you add the AB-Customer Obsession principle to the level of the company’s cultural principles and sew it through all processes, you can increase the likelihood that stillborn, unnecessary features and products will not be created.
Completing guide for perfect customer
in the previous article, we talked about How to Talk to Users